FDIC Criticized for Debanking Crypto Companies and Approach to Financial Inclusion and Cryptocurrency

The FDIC is facing criticism for its handling of financial inclusion, cryptocurrency, and "Operation Chokepoint 2.0," which some believe is unfairly targeting the crypto industry. The release of redacted "pause letters" by the FDIC has only added to these concerns, validating long-standing complaints from crypto-focused companies. The ongoing litigation between Custodia Bank and the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City, over Custodia's denied application for a Federal Reserve master account, could have significant implications for the ability of crypto-focused banks to operate on a level playing field. As the financial landscape continues to evolve, the FDIC and Federal Reserve are under increasing pressure to justify their approaches to innovation, inclusion, and fairness.

A report by AIMA suggests that the government is coordinating a regulatory attack on crypto companies, known as "Operation Chokepoint 2.0," which includes the debanking of such companies. This is in line with a 2023 paper by law firm Cooper and Kirk, which revealed that the OCC issued informal guidance in 2021 to limit crypto companies. The fallout from Chokepoint 2.0 has eroded trust within the financial sector, particularly among smaller firms and crypto companies that feel unfairly targeted. It is crucial for the FDIC and Congress to establish a regulatory framework for digital assets that promotes fairness, innovation, and protects the integrity of the financial system. The future of U.S. financial regulation in a world increasingly defined by digital assets on decentralized technologies depends on transparency, collaboration, and forward-thinking inclusive policy.